Earlier last month, Gome Retail Holdings, once one of China’s leading electronics retailers, suspended staff payments due to running out of cash. The topic “Gome stopped paying employees salaries” became the most searched on the popular Chinese social media platform Weibo.
According to Apollo News, Gome recently received funding from its founder’s wholly-owned subsidiary to solve the staff payment problems.
A filing to the Hong Kong Stock Exchange on December 8 shows that the company has entered into a loan agreement with Shinning Crown Holdings, run by Gome’s founder Huang Guangyu.
Huang agreed to grant Gome Retail Holdings an interest-free, unsecured loan of about $19 million (HK$150 million). The loan has an initial term of six months and can be extended by both parties in writing before its expiry.
The loan’s proceeds will be used as general working capital, which can be used, but is not limited to, paying staff salary.
Apollo noted that Gome has not yet paid wages for its employees from September through November. But the loan from Huang can only cover a maximum of one month’s salary.
Troubles just came to Gome one after another. Yicai reported that late last month, while the staff payment issue was still unsolved, the company had to face an alleged bankruptcy filing from its furious suppliers for unsettled debts.
On November 29, The Case Center of Ten Billion of Industrial Institute, a legal service provider, wrote on its Weibo account that Gome’s suppliers have applied for liquidation of the Beijing-based retailer as the firm owes them millions of yuan.
Data from the Tianyancha app reported that Gome and its units had disclosed information about the person subject to enforcement. The execution target is about $11.2 million (78 million yuan), and the enforcement court is the People’s Court of Saihan District in Hohhot city.
Although Gome has refuted the news, the legal firm still claimed that the court had begun reviewing the case.
According to Da Ji Yuan, Gome Retail was founded by Huang in 1987 and engaged in offline retail, internet, finance, smart home or home appliances manufacturing, real estate, financial investment, and many others. In 2004, the company was listed on the Hong Kong Stock Exchange.
Data from the interim report released in September shows that Gome Retail shut down 562 stores and opened 192 new stores in the year’s first half. The firm has also closed its business in 60 cities and towns.
Yicai, citing a filing to the Hong Kong Stock Exchange, reported that Gome’s sales revenue in the first three quarters plunged by 55%-60% year-on-year. Moreover, the company forecasts this year’s net loss to surge by 35%-55% from last year’s $632 million (4.4 billion yuan).
The interim report also shows that Gome Retail owes a total of $8.1 billion (58.6 billion yuan) while it has only $332 million cash on account, of which nearly $3.2 billion are loans due this year.As reported by Sohu, so far this year, Huang and his wife have cut holdings 15 times, including selling a 24% stake in Gome. His shareholding ratio has plunged to 39.2% from 59.9% early this year.